Harsha clarifies on Volkswagen debacle

Deputy Foreign Minister Harsha de Silva issued a personal clarification regarding the Volkswagen deal, in which he detailed why plans with that car manufacturer did not go ahead.

In a evidence based, fact-filled message posted on Facebook the Deputy Minister said,

‘1. Given I was responsible for the initiation of this project I would like to place the following facts before the public.

2. In my new job as the Deputy Minister of Policy Planning and Economic Affairs I met with the then Ambassador of Germany HE Dr Jurgen Morhard in Early January 2015. At this meeting the Ambassador indicated that Volkswagen had attempted to set up a plant in Sri Lanka since 2008 but failed due to ‘various’ reasons.

3. I indicated to him that we would be delighted to have VW set up a plant in Sri Lanka and we initiated discussions between the Government and the company.’

Of the signing Deputy Minister de Silva said,

‘1. Having initiated the possible investment, HE the Ambassador and I moved out.

2. We were told the discussions continued among the various stakeholders locally. We were informed that Volkswagen’s local agent Senok Automobiles representing the carmaker negotiated terms with several government authorities to get necessary clearances.

3. In mid-August 2015 BOI and Senok Automobiles signed an agreement to establish an assembly plant for VW in Kuliyapitiya.’

The Deputy Minister quoted the German Embassy Deputy Head of Mission Dr. Michael Dohman as having said during the signing ceremony in August, “It is important for the German Embassy to have a big company like Volkswagen in Sri Lanka. Germany is always talking to enterprises to attract them here. People will have to be trained and educated, and many other components are needed, so it will boost the local economy,”

On why the deal did not go through, Deputy Minister Harsha de Silva offered this argument:

‘1. In just a matter of a couple of weeks after signing the agreement, on 3 September 2015, Volkswagen, after months of denial, admitted to the EPA in the US that they had cheated on emissions tests on some of their diesel models in the US. On 18 September 2015, the EPA went public with this admission of guilt.

2. Soon thereafter the VW stock crashed and the senior management was fired. Later some 30,000 jobs were cut and it has thus far cost the carmaker some US$ 18 billion in losses.’

The Deputy Minister said that in Sri Lanka,

‘1. This scandal that rocked VW was a complete shock to everyone, obviously including us in Sri Lanka. Apparently Senok Automobiles who had signed for VW had attempted to save the agreement and continue with the investment as planned.

2. However, at one point, I believe after much negotiation, the Government had decided it would be better not to go with a dedicated VW assembly plant due to possible legal issues that could crop up due to the massive fallout from their emissions scam. This we knew today when the PM explained the sequence of events to us.

3. Given the BOI agreement had still been in place with Senok Automobiles for the original VW assembly I understand that they had rescued the project by agreeing with the BOI to go ahead to establish the plant to assemble various makes of European automobiles.

4. It had been for this assembly plant, renamed Western Automobile, the foundation stone laid for an automobile assembly. At no point at the foundation laying ceremony (which I could not attend) had there been any mention of the plant being for VW.

He adds further,

‘In fact since I moved out of my earlier portfolio of Deputy Minister of Policy Planning and Economic Affairs to the new one in the Foreign Ministry in August 2015, I had no dealings with the project and was sincerely unaware of the various changes until it was explained today. I would appreciate that fact be respected.

I hope the above explains the confusion and we as a country can be satisfied that the assembly plant is being established and many jobs will be created besides thousands of training opportunities for young people.’

There are 14 Comments

Government has failed miserably to inform the public in timely manner the changes that have taken place since the signing of original MOU, this is the confusion after having big tamashas. As MR said yesterday that the car assemblies carried out even now in variety of ways, now the government has legalized.

Both Senok owned by Selvanayagam and Volkswagen are questionable companies and coming to Sri Lanka to evade other countries that severely criticized VW. I am aware that SEnok owners were bribing many top UNP officials and goit many businesses in Sri Lanka

How can the initial agreement be valid if senok signed on behalf of a third party? Senok is only an authorised agent for selling and maintaining vehicles. They have no involvement or authorisation to manufacture VW. In that event why was an agreement of this magnitude approved? How can the government subsequently agree to various vehicles being assembled in Sri Lanka when no principal manufacturer is a part of the agreement? How can Tax holidays be given without any specifics being known?

Yes, we have to respect the fact that the country got a car assembly plant but all of you sold the idea that VW is comming to Sri Lanka. You should have done this statement when you realised the deal was not going ahead. Not after the media reveal the truth. Had you done that, then it would be responsible and ethical. Because most of the the members of your government gave housands of talk re VW and the invested confidence etc... PM made a statement in the parliament re this. But he forgot to make a statement when the deal is off. This is a big question about the Trust. Nothing else?

First we must understand who are the manufactures in Europe that are willing to purchase automobile parts from Sri Lanka ? None of that is published, which means NO Car company has any agreement to manufacture nor purchase anything from the local plant. The production cost in Sri Lanka per unit is very high thus unable to compete with Eastern Europe, Mexico, The Philippines and Vietnam. Sri Lanka has a work force that is hugely unreliable and lazy. Their productivity and attendance in compression to Eastern Europe or Mexico is well below average. Today many of the high tech industry are considering these countries NOT only for low cost per unit but also they are being recognized as less corrupt countries with minimum political involvement. When combined with united nations allegations on HR violations whether previous government or the unwillingness of the current government of implementation the recommendations I don’t think any EU car company would be willing to risk their reputation by direct involvement in Sri Lanka. VW has a small problem with emission control when compare to the headache they may inherit by an unwise investment in Sri Lanka

The unethical statemments specially by the country's Prime Minister and on top of that getting the President to the project sight has kicked up a Bid Roar !!!! Harsha, do you understand to what extent will this FALSE announcement will carry ???? This will be a diplomatic question ????? Why do we need such STATEMENTS and ground breaking projects done without proper clarifications and the Blessings from the German Mother Company and the Embassy representatives present !!!!! As you know the current situation in the country's economy being failing stage , the governmment is facing major corruption on ( Central Bank Bond Scandle Issue , Sri Lankan AirLine issue , Hambantota Harbour issue, Justice NOT prevailed on the former regime , Coal procurement Issue , Paddy Farmers Issue , Humaya project Issue , Salawa Army Ammunition storage facility Issue , Bandarawela Earth Slides issue
) .......etc . When Do you think that this Government ( joint UNP + SLFP ) will try to calm the Populations Dissapointments ?????

Sorry that the Cabinet cannot get their facts right before going before the public .The Ministers can be satisfied that the last elections gave them the opportunity to have a mega cabinet and so made way for a large number to enjoy the perks of good living ..as we are to be satisfied that what ever the project is there would be a few jobs generated ..even if the work experience is not with a prestigious company for the CV to look good .

Utter nonesense. They knew VW was in big trouble. They lied. They now say legal issues is why they stopped it? No VW stopped it because they were strapped for cash. They do not have a market in S.Asia. They got caught lying and giving State land to a man who swindled billions via Kobelco and provided a tax free haven for a decade. They got egg on their faces. No wonder people are calling it Hoaxwagen

Germany has made immense contribution to the development of Sri Lanka.
Ceylon German Technical Training Institute is one of the clear examples that has benefited thousands of auto and other types of technicians passing out of this school who are now working and living in many parts of the world.
VW having it's origin in Germany did have an interest in the country many decades ago but due to insecure political climate they kept it shelved and when they did make a decision the timing went wrong due to their legal involvement in the US over emission issues of their automobiles and had to eventually face off a huge fine that shook the very foundation of the giant VW auto industry which would explain why they had to withdraw or shelve their plans.
How, Sri Lankan must be happy that be it VW or any other, we are still going to get a plant for the auto industry, be it car building or assembly, we should be happy that this
plant is going to generate a lot of jobs in all fields of the auto trade.
Instead of being happy about it why are we harping onto VW at all. This typical Sri Lankan mentality - good or bad - there is a protest and unsavoury comments.
Well done to most Sri Lankans and like most Sri Lankan would say " Hebatama meke kalakanni ratak"

The minister was on tape talking big about bringing VW on a Derana TV show. He talked about how a 10 year old Rajapakse government could not do it and how VW which beat Toyota in total sales one year is coming to Sri Lanka. Even at that time he did not have all the facts. A swindler got free land and all the BOI perks for bringing in a so called spare parts factory. NO ONE builds Assembly plants without a certain company or model they have in mind to assemble. So the minister got scammed and had no shame. He was talking too big. President Sirisena is a great simple man and he does not talk big.

It is simple matter the WV company would have fired the person who gave wrong data,,then things can come right.It is not a matter carry the case against the WV company and take advantage,it is like recently one of the Cellphone company found fault with their battery for the fire and replaced it,no one rejecting it.WV is a very good car.Rivals too
playing big issue developing our nation.What has happen to Car Upali wanted to assemble,now shifted to another destination.

VW has categorically denied that they were to open a car assembly plant in SL. Do you mean to say that once the Board is shuffled that their policies are not passed on? (unlike in the case of ministries in SL).We understand that it is a face saving exercise.

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